Deduction u/s 80 I C

[Dharmender Batra]

The assessee has taken the claim 100% in first five years in Himachal pradesh. Now he has done substantial expansion. Can he claim 100% deduction for next 5 years or it will be restricted to 25% of profit only

[Rama Krishana]

Are you talking about exemption under notification no. 50/2003? The answer to your query is yes. You can enjoy the exemption period of 10 years even if substantial expansion of your unit. There is no restriction on expansion after commencement of exemption period.  In fact, no government would like to restrict the progress or development therefore, more production would not dis-entitle you to avail the benefit of exemption for the remaining period.

[Dharmender Batra]

dear  sir,

thanks  for  ur  reply. i  m  just  asking  about  deduction  u/s  80  IC  that  since  the  entitlement  is  for  first  5  years  100%  and  next  5  years  restricted  upto  25%.  Already  assessee  has  claimed  the  deduction  for  5  years  100%.  Now  he  has  done  substantial  expansion  as  per  the  definition  of  section  80  IC.  Can  he  claim  deduction  upto  100%  for  next  5  years  or  it  will  be  restricted  to  25%  only.

[Rama Krishana]

Yes, Dharmender Batra Ji, you are right, I have given reply under central excise instead of under Income Tax. But, the similar principal is applicable to Section 80IC of the Income Tax also. A unit availing exemption under section 80 IC, can not re-initiate the exemption period from the date of expansion. Total period of exemption shall be 10 years and exemption would be allowed strictly under section 80IC(3) i.e. 100% exemption upto 10 year in case of certain units and 100% exemption upto 5 years and 25% exemption for subsequent 5 years for the other units. Therefore, even if you expand your unit substantially after expiry of 5 years, your exemption shall be restricted to 25% for the remaining period of 5 years. 

Dear Sir

Thanks for your valuable reply

can you help us in one more thing i.e. revenue generated from expansion after 01.04.2012 will continue to qualify for deduction under 80IC as per time table available to it. As the 7 years is available after that. Is there any decided case law available from which reference can be drawn.

 

AI Summary

Deduction under section 80IC: substantial expansion does not restart the initial full exemption period; remaining term follows reduced rates.
The exemption tenure for eligible industrial units is fixed and cannot be re initiated by substantial expansion; units either receive full deduction for the entire prescribed tenure or receive full deduction for the initial part and a reduced deduction for the remaining part, and post expansion revenue does not convert reduced rate entitlement into renewed full rate entitlement.